India's biggest problem today is it's looming Current Account Deficit.In economics, the current account is one of the primary components of the balance of payments.It is the sum of the balance of trade (i.e., net revenue on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.The balance of trade is the difference between a nation's exports of goods and services and its imports of goods and services, if all financial transfers, investments and other components are ignored. A Nation is said to have a trade deficit if it is importing more than it exports.India recorded a Current Account deficit of 18.10 USD Billion in the first quarter of 2013. Current Account in India is reported by the Reserve Bank of India.
It is needless to say that India currently is going high on imports overpowering the meager exports.Going by the official data the commodity categories that accounts for the majority of import are Petroleum, Crude & Products and Gold.So far,in order to normalize the situation various steps has been taken by government,RBI official like import duties on gold and platinum has been raised to 10 percent from 8 percent, while the levy on silver has been increased to 10 percent from 6 percent.According to the newly appointed RBI governor Raghuram Rajan various steps has been taken to liberalize FDI and Indian government have been exploring some different options for stably and sustainably funding the CAD.The Reserve Bank of India began weekly sales of cash-management bills to further tighten liquidity and buoy the rupee.
Dollar index reaching record high of र 62 further escalates the worrisome situation. A weaker rupee stokes inflation as India imports about 80 percent of its oil.Reserve bank must act immediately with pro-growth stance to “fix the leaks,”. In the short term there is a need to rely on the RBI with more plumbing measures while government on the other hand must formulate effective structural measures to improve the overall scenario.With Euro zone crisis nearing it's end, and US economic data getting better with time,India needs to aggressively promote its export business and strategically reduce its demand for imports by promoting manufacturing with attractive incentives.Gold import could further be raised to curtail the rupee slide.One aspect that has been truly ignored is the usability of renewable resources in the transport system.Looking at the current trend of India's population growth and transport structure it can be easily predicted that if we continue relying entirely on the use of petrol and diesel,it would never be possible to live freely without high inflation.This could be a game changer for a strained economy like ours.How this can achieved is a big question,and this might also sound hypothetical ,but with advancement in modern technology, impossible is nothing.Already there has been some positive development in this sector,but with little bit of budget allocation and encouragement from government for R&D in this field could open up bright opportunities for Indian economy.While I am hoping for a better future and smooth functioning of India's economy please feel free to share your views and suggest better solutions.
It is needless to say that India currently is going high on imports overpowering the meager exports.Going by the official data the commodity categories that accounts for the majority of import are Petroleum, Crude & Products and Gold.So far,in order to normalize the situation various steps has been taken by government,RBI official like import duties on gold and platinum has been raised to 10 percent from 8 percent, while the levy on silver has been increased to 10 percent from 6 percent.According to the newly appointed RBI governor Raghuram Rajan various steps has been taken to liberalize FDI and Indian government have been exploring some different options for stably and sustainably funding the CAD.The Reserve Bank of India began weekly sales of cash-management bills to further tighten liquidity and buoy the rupee.
Dollar index reaching record high of र 62 further escalates the worrisome situation. A weaker rupee stokes inflation as India imports about 80 percent of its oil.Reserve bank must act immediately with pro-growth stance to “fix the leaks,”. In the short term there is a need to rely on the RBI with more plumbing measures while government on the other hand must formulate effective structural measures to improve the overall scenario.With Euro zone crisis nearing it's end, and US economic data getting better with time,India needs to aggressively promote its export business and strategically reduce its demand for imports by promoting manufacturing with attractive incentives.Gold import could further be raised to curtail the rupee slide.One aspect that has been truly ignored is the usability of renewable resources in the transport system.Looking at the current trend of India's population growth and transport structure it can be easily predicted that if we continue relying entirely on the use of petrol and diesel,it would never be possible to live freely without high inflation.This could be a game changer for a strained economy like ours.How this can achieved is a big question,and this might also sound hypothetical ,but with advancement in modern technology, impossible is nothing.Already there has been some positive development in this sector,but with little bit of budget allocation and encouragement from government for R&D in this field could open up bright opportunities for Indian economy.While I am hoping for a better future and smooth functioning of India's economy please feel free to share your views and suggest better solutions.
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